UPDATE 1-P&G ready for big innovation after Tide Pods delay

5 Min Read

* P&G’s Tide Pods launch is later, smaller than planned

* Aiming for $300 mln in sales in first year

* Sees individual dose units up to 35 pct of laundry in 5-10 yrs

By Jessica Wohl

CINCINNATI, Feb 15 (Reuters) - Procter & Gamble Co regrets the long-delayed debut of its new Tide Pods detergent and intends to introduce more new products and brands that can shake up the market, its chief executive said on Wednesday.

CEO Bob McDonald would like to see the world’s largest household products maker have more of what he calls “discontinuous innovation,” creating new categories, new brands and new technology to use across the entire company, he told a group of reporters at a P&G event in Cincinnati.

P&G is hailing Tide Pods as its biggest product innovation of 2012, despite a variety of setbacks and limited marketing support. Tide Pods — a single-dose, dissolvable packet of detergent, stain fighters and brighteners — were expected on store shelves in August 2011, but are just now appearing at retailers such as Wal-Mart Stores Inc.

Although stores are receiving the product now, there are no plans for big, separate displays that typically accompany a launch in the household products industry.

“While we do take responsibility” for the delay of Tide Pods and “we regret it,” the company introduces about 27 big, new items each year, he said. “We want to do better, we will do better, we didn’t do as well as we would like on Pods.”

Getting it right with Tide is important for P&G’s reputation. Tide was the company’s first brand to surpass $1 billion in annual sales in the late 1980s and McDonald, CEO since July 2009, and A.G. Lafley, his CEO predecessor, are among the executives to have worked on the brand.

“Innovation has never been more critical,” Bruce Brown, chief research and development officer, told reporters at P&G’s commercial innovation center outside of Cincinnati.

It took P&G eight years of research, with 75 technical staff working on the project full-time, to come up with Tide Pods. More than 6,000 consumers have been involved in testing, he said. The company calls it the brand’s biggest innovation since Liquid Tide’s 1984 launch.

P&G said that Tide Pods were delayed first because demand from retailers was so strong, and then because it was unable to ramp up production at a plant in Louisiana quickly enough to meet such demand.

Analysts were surprised by the delays, as P&G is renowned for spending more than $2 billion a year on research and development and more than four times that amount on advertising.

“It is unclear what happened to the P&G that ‘painted purple’ U.S. stores when it launched Prilosec,” Consumer Edge Research analyst Javier Escalante said, referring to that product’s package color and strong in-store marketing support.

P&G is ready with product giveaways, a commercial that will debut during the Feb. 26 Academy Awards and print and outdoor advertising, but is not using big in-store displays for now.

BMO Capital Markets analyst Connie Maneaty trimmed her fiscal 2012 profit expectations, including a reduction of 5 cents per share tied to the delay of the Tide Pods launch, even before the company issued second-quarter results last month.

It is not the first time in recent memory that a P&G product launch has had hiccups. Others included the glitch in 2011 when Gillette could not make enough Fusion ProGlide razors.

Tide Pods are priced at a premium to traditional powder detergent, which may make it tough to entice shoppers. The pricing is more on par with Tide liquid detergents that have added benefits, such as Tide with Febreze, McDonald said.

While P&G delayed its product launch to get production levels right, competitors have muscled in. Church & Dwight Co Inc is already selling its Arm & Hammer Power Paks single-use laundry detergent, Unilever’s All has a single-dose product and so does Henkel’s Purex.

“I welcome competition,” said Alex Keith, P&G’s general manager of North American fabric care.

The packet concept has not yet caught on with consumers in the United States. Liquid detergent is the leader, making up about 70 percent to 80 percent of U.S. sales, followed by powder, she said.

Detergents of all kinds, including those from competitors, line the shelves of grocery stores reproduced at the P&G innovation center. P&G uses the stores, along with other test areas at the discreet building outside Cincinnati, to do research with retailers, shoppers, suppliers and others.

Tide Pods should hit $300 million in sales in their first year, and individual dose detergents in general — including competitors — should account for 30 percent to 35 percent of the market in the next five to 10 years, P&G’s Keith said.

Ian Bell, head of home care and tissue and hygiene research at Euromonitor International, said that he would “very surprised” if the pod category could get over 12 percent to 15 percent of the U.S. market in terms of value sales in the next five years.